Epic Crude Services L.P. Assigned 'B+' Issuer Credit Rating; Term Loan Also Rated 'B+'; Outlook Stable

  • San Antonio-based midstream energy partnership Epic Crude Services L.P. (Epic) is issuing a $1 billion senior secured first-lien term loan B due in 2026. We expect the partnership to use net proceeds from the offering, along with about $1.3 billion of equity, to finance the construction of a 700-mile crude pipeline to Corpus Christi, Texas, fund a reserve account, and pay interim service lease payments to Epic Y-Grade Services L.P.
  • We are assigning our 'B+' issuer credit rating to Epic Crude Services L.P.
  • At the same time, we are assigning our 'B+' issue-level rating and '3' recovery rating to the partnership's $1 billion first-lien term loan. The '3' recovery rating indicates our expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in the event of a payment default.
  • The stable rating outlook on Epic reflects our expectation that construction will be completed on time and within the budgeted amount by early 2020. We believe Epic has sufficient liquidity to construct the crude pipeline in the event there are minor cost overruns, and forecast adjusted debt leverage between 4.0x to 4.5x in 2020, the first full year of operations.
NEW YORK (S&P Global Ratings) Feb. 6, 2019--S&P Global Ratings today took the 
rating actions listed above. Our 'B+' issuer credit rating on Epic Crude 
Services L.P. reflects our assessment of a weak business risk profile and an 
aggressive financial risk profile. Epic is constructing a 700-mile crude 
pipeline connecting the Permian and Eagle Ford basins to Corpus Christi. 
Nameplate capacity includes approximately 590,000 barrels per day (590 mbpd) 
from the Permian Basin, and approximately 200 mbpd from the Eagle Ford Basin. 
In addition, the partnership is planning to have approximately 9,650 mbpd of 
storage capacity. The pipeline follows the same route as the Epic Y-Grade 
line, which minimizes potential delays and cost associated with securing 
additional right-of-ways. We expect the pipeline to be fully operational by 
the first fiscal quarter of 2020.

The stable outlook reflects our expectation that construction will be 
completed on time and within the budgeted amount by the first quarter of 2020. 
We believe the project has sufficient liquidity in the event of minor cost 
overruns. We forecast adjusted debt leverage of between 4.0x and 4.5x in 2020, 
the first full year of operations. 

We could lower the rating if the project's liquidity deteriorates due to 
construction cost overruns or if construction is delayed such that the 
in-service date is pushed into 2021. This could also occur if adjusted debt to 
EBITDA is sustained at more than 5.5x. 

Higher ratings are unlikely given the inherent construction risks of a 
700-mile pipeline. We could consider higher ratings after construction 
concludes, and adjusted debt leverage is sustained below 4.0x while adding 
additional shippers.
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